Kennametal Inc. ( KMT Quick Quote KMT - Free Report) stands to gain from its presence in diverse end markets, which allows it to neutralize risks associated with a single market. Some of KMT’s key end markets include automotive and machine tool, and farm machinery industries plus aerospace among others. In the quarters ahead, strength in KMT’s end markets, including energy, earthworks, aerospace and general engineering, is likely to drive its performance. KMT’s innovation capabilities, operational excellence and solid product offerings have been aiding it for a while in driving profitability and maintaining a healthy margin performance. For instance, in third-quarter fiscal 2022 (ended Mar 31, 2022), KMT’s gross profit grew 9.6% year over year while the margin increased 110 basis points (bps) on the back of a strong operating leverage. Kennametal focuses on rewarding its shareholders through dividend payments and share repurchases. In the first nine months of fiscal 2022, KMT used $50.1 million for paying out dividends to its shareholders and bought back shares worth $50.5 million. The board of directors approved a share buyback worth $200 million in August 2021, which is valid for three years and will be funded by KMT’s operating cash flow. However, challenges related to escalating costs and expenses pose a concern. In the first nine months of fiscal 2022, KMT’s cost of sales grew 5.8% year over year and operating expenses expanded 5.7%. In third-quarter fiscal 2022, operating income suffered from $13 million headwinds from high raw material costs.. Cost inflation is likely to continue affecting its margins and profitability in fiscal 2022 (ending Jun 30, 2022). Kennametal’s global presence exposes it to various environmental laws and regulations in the countries where it operates. Also, the entity remains vulnerable to foreign currency woes. Adverse forex adversely impacted sales by 4% year over year in the fiscal third quarter. In the quarters ahead, KMT's overseas business might be depressed by a stronger U.S. dollar. Image Source: Zacks Investment Research
In the past three months, this currently Zacks Rank #3 (Hold) stock has dipped 5% compared with the
industry’s decline of 13.7%. Zacks Rank & Stocks to Consider
Some better-ranked companies from the
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